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Intel announces strong Q3 earnings

Intel rode record microprocessor, chipset, and flash sales to a strong third …

Today Intel put out a strong Q3 earnings report on the back of record processor, chipset, and flash shipments. Revenues in the third quarter weighed in at $10.1 billion—up 15 percent year-over-year, and up 16 percent versus the second quarter of this year. Wall Street responded positively to the news, with INTC up 5 percent in after-hours trading.

Part of the uptick in the stock was no doubt due to Intel's gross margins of 52.4 percent, up from 46.9 percent in Q2. These aren't the highest gross margins that Intel has seen (margins have gone north of 60 percent in the past), but anything over 45 percent is good. Intel attributes the increase in margins to a combination of record-setting microprocessor unit shipments, low microprocessor unit costs, lower 45nm production start-up costs, and write-offs for manufacturing costs. In a conference call after the earnings were announced, Intel suggested that margins next quarter may improve by up to five points, taking them up to 57 percent.

Intel CEO Paul Otellini also told analysts that the Asia-Pacific region set volume records, with the USA and Europe also showing strong demand.

Intel mainly has its Mobility and Digital Enterprise groups to thank for the revenue increase, with revenues from the mobile segment up 20 percent and revenues from the Digital Enterprise group up 12 percent. Mobile is especially hot, and Intel expects to see 30 percent year-over-year revenue growth from this segment as the company ramps up 45nm production and moves silicon into more and more mobile devices.

Within the Digital Enterprise and Mobile groups, microprocessors set volume records this quarter. The quad-core ramp-up was especially strong, as was the uptake of the most recently launched vPro products. Intel also reaffirmed in the call that its 45nm "Penryn" products are still on track for a November 12 launch.

Microprocessors weren't the only product that set volume records. Chipsets set records as well, with the Santa Rosa mobile platform being particularly successful. Intel sees the chipset volumes as an indicator of further microprocessor volume growth, since chipsets go onto the motherboard before microprocessors do.

Part of Intel's profit picture is in reduced operating costs, some of which are due to layoffs. Intel has 12 percent fewer employees than it did this time a year ago, and 2 percent fewer than the second quarter of this year. The company plans to continue the layoffs by cutting 2,000 more employees.